Banking sector outlook for H2


In last week’s installment, we reviewed the operating environment in which financial institutions achieved their half year results.

Financial sector spotlight with Omen Muza

This week, we look at the dominant themes for the remainder of the year, half of which we have almost dispensed with anyway.

What do banks think the second half of the year (H2 2016) has in store for them and what are they doing to try and design a desirable end-game?

Re-engagement with creditors and arrears clearance key
Creditor re-engagement and debt restructuring were clearly a priority in the period under review and continue to be, since initial deadlines appear to have been missed and this is not lost on the banks.

Arrears clearance is perhaps the most anticipated initiative at the moment and banks are banking on the outcome of government’s re-engagement efforts with international financial institutions such as the World Bank, International Monetary Fund and African Development Bank, from whom many bilateral lenders take a cue.

The expectation is that successful implementation of the external debt arrears clearance strategy will unlock the much-needed stimulus package required to rescue the economy from the vice-like grip of a longstanding liquidity crunch.

“Medium-term economic growth prospects for Zimbabwe are positive, particularly with successful re-engagement with creditors and clearance of external payment arrears with multilateral financial institutions, which would pave the way for access to international capital markets.

Agribank envisages increased international support and enhanced private sector partnership in agriculture financing following the clearance of external payment arrears,” says Sijam Biyam, Agribank chairman .

FBC Holdings chairman Herbert Nkala agrees that re-engagement is potentially a game-changer for the country’s growth trajectory.

“The government’s re-engagement efforts with international financiers remain critical to the improvement of the country’s future growth prospects and funding opportunities,” he says.

Drive to increase footprint
Despite the excruciating operating environment likely to characterise H2 2016, financial institutions remain positive about long-term economic prospects and rather than sitting on the fence and adopting a wait-and-see attitude, many are focusing on increasing their footprints through roll out of branches and enhancement of technological platforms. Some want to focus on providing customers with a wider and more efficient product suite, such as BancABC, which intends to bring “more initiatives to the market in the second half of the year,” according chairman Alvord Mabena.

Downward pressure on revenue and cost containment/management
Banks see the capping of interest rates and fees applicable on banking channels as presenting a veritable strain on their revenue-generating capacity.

“The limits imposed on interest rates and bank charges will result in increased pressure on margins going forward, threatening the sustainability of the earnings posted to date,” ZB Financial Holdings Limited group chief executive Ron Mutandagayi says.

David Whatman, Ecobank Zimbabwe chairman, concurs and contends that: “The continued downward pressure on interest rates and bank charges, coupled with the reduction of consumer disposable incomes and the resultant reduced savings, will continue to present challenges to the entire banking sector.”

In view of these downward pressures on revenues, cost containment or management will no doubt be a strategic imperative for financial institutions in H2 2016.

Strategic shift towards SME financing
Faced with deepening competition for a dwindling pool of good clients, banks have to identify new uncontested markets — or blue oceans, if they still exist — and some are already doing so.

NMBZ Holdings, for instance, notes that: “The banking subsidiary continued to make inroads into the broader market segments thereby laying a foundation for a strategic shift towards small to medium sized enterprises,” according to chairman Ben Chikwanha

Cautious asset creation/slowdown in lending
Stung by the resurgent risk of credit default, which has seen non-performing loans creeping back up, banks generally intend to remain prudent in growing their asset bases, while deepening existing relationships in the corporate and retail banking space.

This slowdown in lending is also in part the result of total national savings that are not expected to improve in the short term, thereby limiting the pool of funds that banks can lend to productive sectors of the economy.

Adoption of e-commerce strategies
As banks search for more cost-effective ways of delivering their services, the adoption of e-commerce strategies is of paramount importance and is already one of the dominant themes of the second half of 2016.

This has also been given impetus by cash shortages that have dogged the markets for the greater part of 2016 and caused payment streams to migrate to electronic channels such as mobile money, plastic money and Internet banking. FBC Holdings is one institution whose e-commerce priorities are clearly spelt out.

“The group will continue to promote the adoption of e-commerce business practices and invest in e-commerce driven distribution channels,” Nkala says.

Cautious optimism
Whatever challenges banks anticipate in the second half of 2016, the air of cautious optimism is unmistakable, and senior banker George Guvamatanga’s sentiments are emblematic of this hope.

“Barclays Bank of Zimbabwe, even within this context, remains confident that the economy carries huge potential to be realised into the future and that within its strategy, it will successfully tap into pockets of opportunity that exist,” he says.

Clearly, the caution is premised on the fact that something must happen in order for the potential to be realised and it is the uncertainty of something meaningful actually happening that keeps banks on the edge.

The mid-term fiscal review gives people a glimmer of hope that government may finally be ready to take the necessary bold actions, but then again, the proof of the pudding is in the eating.

Omen N. Muza edits the MFSB. You can view his LinkedIn profile at or initiate contact on


  1. Excessively high bank charges and terribly high interest charges on personal loans have actually killed revenue generation capacities of banks. Successful environments elsewhere in the world make good profits without these insanely phenomenal charges on customers. Why is this not the case here? The answer is simple management incompetency and greed. That is why the majority of bad loans are credited to bank administrators, management, shareholders and their chronies. This is what needs to change. Not the junk that we are made to imbibe by pedestrian analysts.

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